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Structural Transformation and the Deterioration of European Labor Market Outcomes

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Author Info
Richard Rogerson

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Abstract

This paper examines the evolution of hours worked in France, Germany, Italy and the US from 1956-2003 and assesses the role of taxes and technology to account for the differences. The empirical work establishes three results. First, hours worked in Europe decline by almost 45% compared to the US over this period. This change is almost an order of magnitude larger than the effects associated with the increase in unemployment over this time period. Second, the decline occurs at a steady pace from 1956 until the mid 1990s, in contrast to the fact that the relative increase in unemployment occurs in the mid 1970s. Third, the decline in hours worked in Europe is almost entirely accounted for by the fact that Europe develops a much smaller service sector than the US. I build a simple model of time allocation to understand the evolution of total hours worked and their distribution across sectors, and calibrate it to match the US between 1956 and 2000. I find that relative increases in taxes and technological catch-up can account for most of the differences between the European and American time allocations over this period.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12889.

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Date of creation: Feb 2007
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Handle: RePEc:nbr:nberwo:12889

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E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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References listed on IDEAS
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pammolli, Fabio & Riccaboni, Massimo & Magazzini, Laura, 2008. "The Sustainability of European Health Care Systems: Beyond Income and Ageing," MPRA Paper 16026, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Margarida Duarte & Diego Restuccia, 2007. "The Role of the Structural Transformation in Aggregate Productivity," Working Papers tecipa-300, University of Toronto, Department of Economics. [Downloadable!]
    Other versions:
  3. Bah, El-hadj M., 2007. "Structural Transformation in Developed and Developing Countries," MPRA Paper 10655, University Library of Munich, Germany, revised 19 Sep 2008. [Downloadable!]
  4. Margarida Duarte & Diego Restuccia, 2007. "The structural transformation and aggregate productivity in Portugal," Portuguese Economic Journal, Springer, vol. 6(1), pages 23-46, April. [Downloadable!] (restricted)
    Other versions:
  5. Anderson, Simon P & Gabszewicz, Jean Jaskold, 2005. "The Media and Advertising: A Tale of Two-Sided Markets," CEPR Discussion Papers 5223, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Ana Lamo & Julian Messina & Etienne Wasmer, 2007. "Are Specific Skills an Obstacle to Labor Market Adjustment? Theory and an Application to the EU Enlargement," CSEF Working Papers 172, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
    Other versions:
  7. Lagerlöf, Nils-Petter & Basher, Syed A., 2005. "Geography, population density, and per-capita income gaps across US states and Canadian provinces," MPRA Paper 369, University Library of Munich, Germany, revised 28 Sep 2006. [Downloadable!]
  8. Lei Fang & Richard Rogerson, 2007. "Policy Analysis in a Matching Model with Intensive and Extensive Margins," NBER Working Papers 13007, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Michaels, Guy & Rauch, Ferdinand & Redding, Stephen J, 2008. "Urbanization and Structural Transformation," CEPR Discussion Papers 7016, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  10. Lee Ohanian & Andrea Raffo & Richard Rogerson, 2006. "Long-term changes in labor supply and taxes: evidence from OECD countries, 1956-2004," Research Working Paper RWP 06-16, Federal Reserve Bank of Kansas City. [Downloadable!]
    Other versions:
  11. Bah, El-hadj M., 2007. "A Three-Sector Model of Structural Transformation and Economic Development," MPRA Paper 10654, University Library of Munich, Germany, revised 19 Sep 2008. [Downloadable!]
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  13. Richard Rogerson, 2007. "Taxation and Market Work: Is Scandinavia an Outlier?," NBER Working Papers 12890, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  14. Richard Rogerson, 2008. "Market Work, Home Work and Taxes: A Cross Country Analysis," NBER Working Papers 14400, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Alberto Alesina & Joeph Zeira, . "Technology and Labor Regulations," Working Papers 0729, University of Crete, Department of Economics. [Downloadable!]
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  18. Francisco J. Buera & Joseph Kaboski, 2008. "Scale and the origins of structural change," Working Paper Series WP-08-06, Federal Reserve Bank of Chicago. [Downloadable!]
  19. Lei Fang & Richard Rogerson, 2007. "Product Market Regulation and Market Work: A Benchmark Analysis," NBER Working Papers 12891, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  20. Tatom, John, 2007. "Is Tax Policy Retarding Growth in Morocco?," MPRA Paper 6011, University Library of Munich, Germany. [Downloadable!]
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